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# IMANET Exam CMA Topic 5 Question 41 Discussion

Actual exam question for IMANET's Certified Management Accountant exam
Question #: 41
Topic #: 5
[All Certified Management Accountant Questions]

Finn Products, a start-up company, wants to use cost-based pricing for its only product, a unique new video game. Finn expects to sell 10.000 units in the upcoming year. Variable costs will be \$65 per unit and annual fixed operating costs (including depreciation) amount to \$80,000 Finn's balance sheet is as follows:

If Finn wants to earn a 20% return on equity, at what price should at sell the new product?

The net income Finn will require is calculated as follows:

Return on equity = Net income + Equity

Net income = Equity x Return on equity

= \$300,000 x 20%

= \$60,000

The necessary selling price can then be derived:

Net income = [(Selling price - Variable costs) x Units sold] - Fixed costs

Selling price = (Net income + Fixed costs + Variable costs) Units sold

= (\$60,000 + \$80,000 + \$650,000) 10,000

= \$790,000 10,000

= \$79 per unit